DEFM14A: Battalion Oil Corporation Stockholders to Vote on $7.00 per Share Merger with Fury Resources

Battalion Oil Corporation's stockholders will convene a special meeting on November 19, 2024, to vote on the proposed merger with Fury Resources, Inc., where each share will be converted into the right to receive $7.00 in cash.

Summary

• Battalion Oil Corporation has entered into a merger agreement with Fury Resources, Inc., a wholly-owned subsidiary of Ruckus Energy Holdings, LLC.
• Under the terms of the agreement, Fury Resources will acquire Battalion Oil for $7.00 per share in cash.
• The merger consideration represents a premium of 32.6% over the closing price on December 14, 2023, and 129.5% over the closing price on September 18, 2024.
• The transaction is a going-private transaction, and if completed, Battalion Oil will become a privately held company wholly owned by Fury Resources.
• A special meeting of Battalion Oil stockholders is scheduled for November 19, 2024, to vote on the merger agreement.
• Luminus Energy Partners Master Fund, Ltd. and OCM HLCN Holdings, L.P., collectively owning approximately 61.6% of Battalion Oil's common stock, have entered into a voting agreement to vote in favor of the merger.
• The Rollover Sellers will contribute their preferred stock to Parent in exchange for preferred stock of Parent.
• The board of directors of Battalion Oil recommends that stockholders vote in favor of the merger agreement.

Sentiment

Score: 7

Explanation: The sentiment is cautiously positive. The deal offers a premium to shareholders, but the company will cease to exist as a public entity. The reliance on debt financing and the need for equity contributions introduce some uncertainty.

Positives

• Stockholders will receive $7.00 per share in cash, providing immediate liquidity.
• The merger consideration represents a significant premium over recent trading prices.
• Major stockholders are already committed to voting in favor of the merger, increasing the likelihood of approval.

Negatives

• The company will become privately held, and stockholders will no longer have an equity stake.
• The company will be delisted from the NYSE American exchange and deregistered under the Exchange Act.
• Performance-based Company RSU awards will be cancelled for no consideration.

Risks

• The merger may not be consummated in a timely manner or at all.
• Required regulatory approvals may not be obtained.
• Company stockholders may fail to adopt the merger agreement.
• The announcement or pendency of the merger could adversely affect the company's business relationships and operations.
• Legal proceedings may be instituted against the company related to the merger agreement.

Future Outlook

The Company expects to consummate the Merger in the fourth calendar quarter of 2024, subject to the satisfaction of all conditions.

Management Comments

• The board of directors of the Company recommends that the Company stockholders vote FOR the adoption of the Merger Agreement and FOR the other matters to be considered at the special meeting.

Industry Context

The announcement reflects ongoing consolidation activity in the oil and gas sector, driven by factors such as the desire for scale, access to reserves, and operational efficiencies.

Comparison to Industry Standards

• The merger consideration represents a premium of 32.6% over the closing price of the Companys common stock on December 14, 2023, and 129.5% over the closing price of the Companys common stock on September 18, 2024.
• Houlihan Lokey's opinion suggests the merger consideration is fair from a financial point of view, but it's essential to compare this to other similar transactions in the Delaware Basin.
• Comparable companies like HighPeak Energy, Matador Resources, and Permian Resources can be used as benchmarks for valuation multiples.

Related Party Transactions

• In connection with the execution of the Merger Agreement, two of our largest stockholders, Luminus Energy Partners Master Fund, Ltd. (which we refer to as Luminus) and OCM HLCN Holdings, L.P. (which we refer to as Oaktree), entered into a voting agreement (which we refer to as the Voting Agreement) with Parent pursuant to which such stockholders agreed to vote certain of their respective shares of capital stock of the Company in favor of the adoption of the Merger Agreement, subject to certain terms and conditions contained in the Voting Agreement.
• As a result of the Merger, the shares of Company preferred stock contributed to Parent will be cancelled and extinguished without any conversion thereof or consideration paid therefor.

Stakeholder Impact

• Shareholders will receive $7.00 per share in cash.
• Employees face uncertainty regarding their future employment with the new entity.
• The impact on customers and suppliers is uncertain but could be affected by changes in management and strategy.

Next Steps

• Battalion Oil stockholders will vote on the merger agreement at the special meeting on November 19, 2024.
• The Company and Parent must obtain necessary regulatory approvals and satisfy certain other closing conditions.

Key Dates

Keywords

merger, acquisition, stockholders, Fury Resources, Battalion Oil, agreement, consideration, vote